University of Chicago professors among winners of economics Nobel prize

Monday

Oct 14, 2013 at 8:09 AM

CHICAGO — One of three Americans to win this year's Nobel prize in economics says he's not sure how he'll celebrate but he's "still working on taking a deep breath."

Lars P. Hansen is a professor at the University of Chicago. He says Monday morning's phone call from Sweden came when he was on his way to the gym. He calls the win a surprise.

Hansen won along with Eugene Fama, who teaches at the University of Chicago's Booth School of Business. A Yale professor also won.

Hansen has taught at the Hyde Park school since the early 1980s. He considers himself an "econometrician." His work studies the intersection of economics and statistics.

The 60-year-old is still actively performing research and hopes the prize will help promote "good research" in his field.

The Royal Swedish Academy of Sciences said that through their separate research, the three had laid the foundation of the current understanding of asset prices and changed the way people invest.

While it's hard to predict whether stock or bond prices will go up or down in the short term, it's possible to foresee movements over periods of three years or longer, the academy said.

"These findings, which might seem surprising and contradictory, were made and analyzed by this year's laureates," the academy said.

Shiller, an economist famous for having warned against bubbles in technology stocks and housing, said he reacted with disbelief when he got the call from the academy early Monday.

"People told me they thought I might win. I discounted it. Probably hundreds have been told that," he said to The Associated Press.

Shiller is known for developing the Case-Shiller index, a leading measure of U.S. residential real estate prices, with Karl Case, a Wellesley College economist.

He said he believes finance is a structure for society, which if regulated properly is "at the core of our civilization."

"It seems to some people it's selfish and money-grubbing. It doesn't really have to be that way. The financial crisis we've been through is traumatic, but we're learning from it," Shiller said.

For example, he said many students from other countries are able to study in the United States because of financial aid made possible by financial investments. He also said the Consumer Financial Protection Bureau established as a result of the recession is holding finance to higher standards.

Starting in the 1960s, Fama and others showed how difficult it is to predict individual stock prices in the short run. His findings revolutionized the practice of investing, leading to the emergence of index funds.

Two decades later, Shiller showed that there is more predictability in the long run in stock and bond markets, while Hansen developed a statistical method to test theories of asset pricing.

"These are three very different kinds of people and the thing that unites them all is asset pricing," says David Warsh, who tracks academic economists on his Economic Principals blog.

American researchers have dominated the economics awards in recent years; the last time there was no American among the winners was in 1999.

The Nobel committees have now announced all six of the annual $1.2 million awards for 2013.

The economics award is not a Nobel Prize in the same sense as the medicine, chemistry, physics, literature and peace prizes, which were created by Swedish industrialist Alfred Nobel in 1895. Sweden's central bank added the economics prize in 1968 as a memorial to Nobel.

This year's Nobel science prizes awarded ground-breaking research on how molecules move around inside a cell, particle physics and computer modeling of chemical reactions. Canadian short-story writer Alice Munro won the Nobel Prize in literature and the Organization for the Prohibition of Chemical Weapons was awarded the Nobel Peace Prize.

All awards will be presented to the winners amid royal pageantry on Dec. 10, the anniversary of Nobel's death in 1896.